GrabAGun Digital Holdings Inc.

Good afternoon and welcome to the Grab a Gun Digital Holdings Second Quarter 2026 Earnings Conference Call. On today's call are Marc Nemati, Chief Executive Officer, and Justin Hilty, Chief Financial Officer. A recording of this conference call will be available on the Grab a Gun Investor Relations website shortly after this call has ended. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, Please press star 1 to raise your hand. I'd like to take this opportunity to remind you that during the call, we will be making certain forward-looking statements. This includes statements relating to the operating performance of our business, future financial results and guidance, strategy, long-term growth, and overall future prospects. We may also make statements regarding regulatory or compliance matters. These statements are subject to known and unknown risks, and uncertainties that could cause our actual results to differ materially from those projected or implied during this call. In particular, those described in our risk factors included in the Form 10-K for the fiscal year ended December 31, 2025, filed by the company with the SEC on March 12, 2026, as well as the current uncertainty and unpredictability in our business, the markets, and the global economy generally. You should not rely on our forward-looking statements as predictions of future events. All forward-looking statements that we make on this call are based on management's assumptions and beliefs as of the date hereof, and Grab a Gun disclaims any obligation to update any forward-looking statements except as required by law. Our discussion today will include non-GAAP financial measures, including adjusted EBITDA. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from our GAAP results. Information regarding our non-GAAP financial measures, including a reconciliation of our non-GAAP financial measures to our most comparable historical GAAP financial measures, may be found in our earnings release, which we filed with the SEC earlier today. and is available on the company's investor relations site. I'll now turn the call over to Marc Nemati. Marc, please go ahead.

Good afternoon and thank you for joining us. The second quarter reflected continued execution along the long-term strategy we've been building over the past several years. We grew ahead of the industry, expanded margins meaningfully, and continued extending the capabilities we've built into the new opportunities like Pew Logistics, which we believe will define the next era of firearms commerce, all maintaining the operating discipline and balance sheet strength that sets us apart. Looking at the second quarter, net revenue increased 9% year-over-year to $23 million, with firearm sales of 8%, while gross margin expanded to approximately 13.5%. Firearm sales growth was primarily driven by an increase in average order value and a continued shift in mix towards higher price point products, reflecting the strength of our customer value proposition. We're especially pleased with our disciplined approach to driving profitability. While revenue increased 9%, cost of goods sold increased by only 6%, resulting in a 39% increase in gross profit and gross margin expansion. I mentioned a moment ago to approximately 13.5%. compared to 10.6% a year ago. Those results reflect the benefits of our AI-driven pricing optimization, a favorable product mix, our sourcing capabilities, and the initial contribution of Pew Logistics as we continue to scale the platform. Just as important is how efficiently we acquire and serve customers. Sales and marketing expense remained approximately 1% of net revenue, reflecting a very lean customer acquisition profile. That efficiency reflects years of investment in technology, supplier relationships, and customer trust, creating a competitive advantage that we believe is difficult to replicate. Peel Logistics continues to make meaningful progress as we extend the capabilities we've built over many years. It is a natural extension of our technology, compliance expertise, fulfillment capabilities, and industry relationships allowing us to serve manufacturing customers while creating another avenue for long-term growth. P-Logistics has now processed more than $1.9 million in gross merchandise value through the end of the second quarter. We recently welcomed our third manufacturer, Backwoods Suppressors, further expanding our reach into a growing product category. Marc Nemati, Justin Hilty, Matthew Vittitow As we onboard new manufacturers and scale operations, we believe Pew Logistics has the potential to become an increasingly meaningful contributor to revenue diversification while benefiting from a capital-efficient operating model and an attractive long-term margin profile. The combination of discipline execution and the differentiated digital model continue to create meaningful operating advantages for our business. Mobile engagement remains strong in the quarter, increasing to 71% of traffic from 67% in the first quarter and accounting for 67.5% of revenue up from 64% in the first quarter. As consumer behavior continues to shift towards digital channels, our technology platform enables a seamless customer experience while providing a structurally lower cost per transaction or cost to serve advantage compared to traditional retail. During the quarter, we continued outfitting our new headquarters and fulfillment and distribution facility, which remains on track to become fully operational in the fourth quarter of 2026. This investment, which we made in Q4 2025, expands our operational capacity and positions us to support the continued growth of both the core business and Pew Logistics. This is a long-term infrastructure investment that reflects our conviction in where the business is headed. Our approach to mergers and acquisitions remains disciplined. We are closely monitoring the landscape and actively evaluating opportunities that could accelerate our long-term vision. Our strong balance sheet and liquidity position provides us with the flexibility to continue investing in our business while remaining disciplined in our approach to capital allocation. We will remain patient and act only when the right opportunity aligns with our strategy and creates compelling long-term value. Stepping back, the second quarter reflects the continued evolution of our business. Our core e-commerce platform continues to grow and increase gross margin year over year. All the capabilities we've built over the past 15 years are beginning to create new opportunities through Pew Logistics. Firearms consumers increasingly expect a frictionless digitally native experience and we believe our capabilities, technology, compliance expertise, and a scalable operating model position us to compete effectively today while creating additional avenues for growth over time. The firearms industry is entering an important period of modernization driven by evolving technology and changing consumer expectations. As the industry evolves, we believe technology can enable more efficient, lawful purchasing experience while preserving features that matter most. Background checks and core compliance safety cards that remain fundamental to the category. I want to be measured here. Any potential changes remain subject to the rulemaking process, and we won't speculate on where those regulations ultimately land. Instead, we'll continue focusing on what we can control, investing in technology, compliance capabilities, and customer relationships required to operate successfully in one of the nation's most highly regulated industries. Regardless of how the rulemaking process ultimately unfolds, Grab a Gun is well-positioned. For more than 15 years, we've invested in the digital infrastructure, compliance capabilities and regulatory expertise required to operate at the intersection of e-commerce and a highly regulated market. If the industry continues to modernize, we believe few companies are better prepared to serve customers within a compliant framework. And our readiness is the result of our investments in technology, compliance and customer relationships. With that, I'll turn the call over to Justin to walk through the financials in more detail. Justin. Thank you, Marc.

I will now provide additional details on our second quarter financial performance. Second quarter total revenues were $23.2 million, an increase of 9.4% compared to $21.2 million in the second quarter of fiscal 2025. Firearms product sales increased 8.5% year-over-year to $19.3 million. reflecting the continued benefits of our AI-powered pricing and demand forecasting capabilities, which enable us to better serve customers while optimizing our business performance. Non-firearms product sales were $3.6 million, an increase of 7% year-over-year, despite continued softness and ammunition demand across the broader 2A industry. We remain focused on leveraging our differentiated capabilities, including our data-driven approach to pricing, demand planning, and customer engagement. allowing us to navigate market conditions and effectively drive sustainable long-term growth. Gross profit in the second quarter was $3.1 million, representing 13.5% of net sales, compared to $2.2 million, or 10.6% of net sales, in the prior year period. Gross margin improved by approximately 290 basis points, driven by a more favorable sales mix towards higher margin firearms categories and the continued execution of our pricing optimization initiatives. We remain focused on identifying opportunities to improve gross margin over time through continued mix optimization, pricing discipline, and the expansion of higher margin opportunities such as Pew Logistics while maintaining our competitive positioning and delivering value to our customers. Operating expenses in the second quarter were $5.7 million compared to $1.5 million in the prior year period. The year-over-year increase reflects investments to support the long-term growth of the business, including incremental resources and infrastructure required to operate as a public company, continued investments in the expansion of Pew Logistics, and headcount aligned with our growth initiatives. As a reminder, the second quarter of fiscal 2025 represented a pre-public period, and the current year comparison reflects the incremental costs associated with building the capabilities to support the business as we scale. We have now reached the final quarter of year-over-year comparisons reflecting these incremental costs. Beginning next quarter, our expense comparisons will be on a more consistent, like-for-like basis, providing greater visibility into the underlying performance and cost structure of the business, while allowing us to continue leveraging the investments we have made to support our long-term growth. Net loss for the second quarter was $1.8 million, compared to net income of $0.8 million in the prior year period. The year-over-year change was primarily driven by the increase in operating expenses discussed above, including higher G&A expenses I just discussed associated with operating as a public company and supporting our growth initiatives. Adjusted EBITDA for the second quarter was a loss of $1.7 million compared to adjusted EBITDA of $0.9 million in the prior year period. The year-over-year change reflects the planned investments we are making to support the long-term growth of the business, including Pew Logistics and incremental resources to support our growth initiatives. These investments were partially offset by higher gross profit from revenue growth and gross margin expansion. Turning to the balance sheet, we ended the quarter with $97.5 million in cash and minimal debt. The decrease in cash during the quarter is primarily driven by the timing of working capital as we reduced accounts payable towards the end of June. Our business model benefits from an efficient working capital profile as we collect cash from customers before paying our suppliers. However, the timing of these payments can impact quarter-end cash balances. As a result, we ended the quarter with $9.3 million in inventory and $7.8 million in accounts payable. For comparison, we ended Q1 with $13 million in accounts payable and relatively the same inventory balance in Q2. We view the second quarter end impact as timing related and do not expect it to represent a change in the underlying working capital profile of the business. While our current performance continues to be anchored by our core e-commerce business, we see Pew Logistics as an important opportunity to further diversify our revenue base and enhance our margin profile over time. The business benefits from an attractive higher margin profile, an asset-light operating model, and the ability to leverage our existing infrastructure and capabilities. As the platform scales, we believe Pew Logistics has the potential to become a meaningful contributor to growth and margin expansion while creating additional long-term value for the company. For the first six months of the year, we repurchased approximately $2.4 million of our common stock under our $20 million share repurchase authorization. We will continue to evaluate opportunistic share repurchases while maintaining a disciplined approach to capital allocation and preserving balance sheet flexibility to support our long-term growth initiatives. As we look ahead, our priorities remain centered on investing in the initiatives that support long-term growth. These include continuing to expand Pew Logistics through the addition of new manufacturers, while building market share and strengthening the position of our core e-commerce business. At the same time, we remain committed to disciplined expense management and thoughtful capital allocation as we invest in opportunities that we believe will create long-term shareholder value. Our strong balance sheet and prudent financial approach position us well to execute on these strategic priorities while maintaining flexibility to pursue future opportunities. With that, I'll turn the call back over to Marc before we move on to the Q&A. Marc?